New Jersey LLC Lawyers
The expulsion or removal of an individual member of a limited liability company in New Jersey requires an order of “involuntary dissociation” from the Chancery Court, unless the LLC members have provided differently in an operating agreement.
Unlike some other states, New Jersey law permits the involuntary dissociation of an LLC member for wrongful conduct or when it is simply no longer reasonably practicable for the members of the LLC to stay in business together.
We represent New Jersey limited liability companies and individual LLC members in disputes over the governance of the business, the removal of members and in proceedings to value an LLC member’s interest. To discuss matters involving limited liability company law, contact our office online or call 201-575-4969 or toll free 888-341-2179.
Under the laws of states that followed the examples of Delaware or New York, the LLC would have to be dissolved or sold to terminate the interest of an individual member.
New Jersey Limited Liability Company Act
New Jersey’s limited liability company act, however, permits a court to involuntary dissociate -- that is, to expel -- an LLC member under the following circumstances.
(a) the member engaged in wrongful conduct that adversely and materially affected the limited liability company's business;
(b) the member willfully or persistently committed a material breach of the operating agreement; or
(c) the member engaged in conduct relating to the limited liability company business which makes it not reasonably practicable to carry on the business with the member as a member of the limited liability company. N.J.S.A. 42:2B(3)(3)(a)-(c).
Fair Value Payments To Expelled Member
A member whose interest has been terminated as a result of involuntary dissociation is entitled to be paid fair value for their interest. Fair value is a proportionate share of the limited liability company, which may be reduced by discounts for lack of control or lack of marketability.
For more information on involuntary dissociation and other issues related to New Jersey LLC litigation, visit our blog at www.newjerseybusinessdissolutionjournal.com.
We regularly represent parties in New Jersey involuntary dissociation procedures, assuring that the rights of the LLC members and the limited liability company are protected.
